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Industry Effects of Monetary Policy: Evidence from India

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  • Ghosh, Saibal

Abstract

The study exploits 2-digit level industry data for the period 1981-2004 to ascertain the interlinkage between a monetary policy shock and industry value added. Accordingly, we first estimate a Vector Auto Regression (VAR) model to ascertain the magnitude of a monetary policy shock on industrial output. Subsequently, we try to explain the observed heterogeneity in terms of industry characteristics. The findings indicate that (a) industries exhibit differential response to a monetary tightening and (b) both interest rate and financial accelerator variables tend to be important in explaining the differential response.

Suggested Citation

  • Ghosh, Saibal, 2009. "Industry Effects of Monetary Policy: Evidence from India," MPRA Paper 17307, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17307
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    Cited by:

    1. Adebayo Augustine Kutu & Harold Ngalawa, 2016. "Monetary Policy Shocks and Industrial Sector Performance in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 8(3), pages 26-40.
    2. Goto, Eiji & Bürgi, Constantin, 2021. "Sectoral Okun's law and cross-country cyclical differences," Economic Modelling, Elsevier, vol. 94(C), pages 91-103.
    3. Hillary Chijindu Ezeaku & Imo Godwin Ibe & Uche Boniface Ugwuanyi & N. J. Modebe & Emmanuel Kalu Agbaeze, 2018. "Monetary Policy Transmission and Industrial Sector Growth: Empirical Evidence From Nigeria," SAGE Open, , vol. 8(2), pages 21582440187, April.
    4. Singh, Sunny Kumar & Rao, D. Tripati, 2014. "Sectoral effects of monetary policy shock: evidence from India," MPRA Paper 62069, University Library of Munich, Germany.
    5. Wenzhe Li, 2018. "Does Targeted Monetary Policy Matter? A Perspective from China," Economic Affairs, Wiley Blackwell, vol. 38(1), pages 106-124, February.

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    More about this item

    Keywords

    industry; monetary policy; interest rate channel; financial accelerator; vector auto regression; cross section regression;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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